It is the best of times or worst of times – depending on which side of the coin you are on.On one hand, the market slump has evaporated billions of dollars of market capitalisation, yet the cheap valuation has presented unlimited opportunities for long term investors.

Amidst the current volatility, China Kunda Technology Holdings Limited (Kunda) pressed ahead with its listing plan with the same decisiveness that characterised successful enterprises.

“ We believe that Kunda’s profile will be elevated by a listing in Singapore, an international financial centre that truly understands our business.” Yang Jinbiao, executive director and chief operating officer of Kunda told Shares Investment (Singapore) in an exclusive interview.

Laying The Foundation For Success

Incorporated in July 2007, Kunda is primarily engaged in the provision of precision moulds, plastic injection parts and IMD products to the electronics, electrical, automobile and specialised devices industries.

For the uninitiated, a mould consist of two or more steel plates with a number of cavities into which a polymeric compound is injected and is one of the most important tools for industrial production.

The company traces its origin to the incorporation of Yick Kwan Tat in 1998 and made a strategic decision to venture into the sales of high-precision moulds for automobile components and IMD products in 2002.

“Following the economic liberation of China in 1978, the manufacturing industry has reached saturation point for most sectors. Surveying the strategic landscape, Kunda decided that the provision of precision moulds for the automobile industry and IMD products has the most growth potential,” Yang commented.

Since moving up the value chain, Kunda has expanded its customer base and now counts directly or indirectly many prominent names such as Audi, BMW, Volkswagen, Sanyo and Walt Disney among its clientele.

Booking Record Gains

From FY05 to FY07, Kunda’s top and bottom lines grew at a compounded annual growth rate of 90.7% and 229.9% respectively. More importantly, gross profit margin soared from 21.2% in FY05 to 33.1% in FY07.

“We are optimistic about the prospects of our Group’s business in the automobile mould and IMD products segments,” Yang explained.

Kunda’s solid performance continued for the nine months ended 31 December 2007 with earnings increasing 27.9% to HK$39.4m. Turnover, however, dipped 7.9% to HK$76.6m as Kunda’s customers placed their orders through their Chinese subsidiaries, which the Group earned technical fees from.

As at 31 December 2007, Kunda had a cash balance of HK$3.7m.

Scaling Greater Heights

The IPO will net $11.6m in cash for Kunda. According to Cai Kaoqun, chief executive officer and executive chairman of Kunda, “The proceeds are earmarked for business development, research and development as well as establishing manufacturing capability.”

Not one to rest on its laurels, the management has made plans to acquire Shenzhen Precision and beef up manufacturing capacity to cater for business expansion.

Specifically, Kunda is targeting the mould market of aviation, high-end automobiles, medical and telecommunications devices for its expansion and is contemplating an extension of its product range.

At the same time, Cai remained sanguine about the prospects of Kunda amidst the economic downturn. “We are convinced that the global economic slowdown will compel more automobile manufacturers to trim costs by sourcing for cheaper products. With the quality of Kunda’s products being equivalent to their European and American counterparts, our growth prospects appear to be secure.”

Up to now, the domestic automobile industry has been growing strongly, hence demand for automobile parts, which required moulds to produce, should remain robust.

In uncertain times like this, the fundamentals of a company are often ignored as negative sentiments prevail. Nonetheless, a company with solid fundamentals and attractive growth prospects is more likely to perform well when confidence returns.